Heuristics Impact on Investment Decision Making of Individual Investors in Pakistan Stock Exchange

Abstract

Purpose: The Pakistan Stock Exchange is a medium for investment in Pakistan financial markets as well as in an international market and give an opportunity to investors in Pakistan to trade shares and contracts through brokers. This research investigates the behavioral factors that influence decision making of investors in PSX that contribute towards the success of PSX and as well as sometimes due to these factors make investment decision making of investors irrational. Design/Methodology/Approach: The data analysis of the research is from use of the quantitative method using Smart PLS 4 using Partial Least Square by utilizing non probability convenience sampling through PSX brokers. Findings: Findings of the research shows that Availability Heuristic, Representative Heuristic, Price Anchoring and Overconfidence heuristic have their influence on individual investor’s decision making at PSX. Implications/Originality/Value: The study discovered that these psychological factors AH, RH, PAH and OCH influence the decision making of Pakistani investor. In the future, investors will need to recognize and understand how these psychological factors may affect their decision-making. By increasing awareness, investors may be able to strengthen the rationality of their investment decisions and, consequently, the efficiency of the market. It's also critical to comprehend how investors make decisions in different geographic and demographic contexts.

Keywords

• PSX
• IDM
• AH
• RH
• PAH